Less developed countries’ external “debt” impedes their economic development and attempts to reduce poverty. But it generates huge revenues for rich countries.
In the decade 1994 to 2004, Brazil paid rich country creditors US$ 400 billion just in interest, equivalent to the entire population of Brazil working a whole year. “Debt” serves various seamlessly linked purposes, all to the advantage of rich country creditors.
It is an indispensable mechanism those countries use to guarantee access to diminishing global resources. “Debt” sustains a super-abundant net flow of easy money to their already unimaginably wealthy financial centers. It helps them to dictate international terms of trade by keeping resource-rich poorer countries in quasi-colonial dependency.
The deceitful mass-murderers who invaded Afghanistan and Iraq and overthrew Haiti’s elected government are not concerned about people in poverty. They will ensure “debt” relief only happens in a way that sustains poor countries’ ability to keep on paying.
Periodically, they remake the Procrustes’ bed in which they install their victims, the better to amputate what they feel larger victims don’t need or to stretch more puny victims to their optimum yield.
The latest G7 declaration on debt relief is another exercise in this procrustean sadism. It reads, “For IDA (International development Agency) and AfDF (African Development Fund) debt, 100% debt stock cancellation will be delivered by relieving post-completion point HIPCs that are on-track with their programmes of repayment obligations and adjusting their gross assistance flows by the amount forgiven.”  So, as many people have already noted, any gains from what may be forgiven in debt are clawed back out of “aid”.
“Debt” and terror – who owes who?
The moral bankruptcy of the rich countries shows most clearly in the case of deeply impoverished countries like Nicaragua. In 1986, the International Court of Justice ruled that the United States owed Nicaragua an indemnity of US $17 billion for the destruction caused by the terrorist Contra war run by the White House. Naturally, the US never paid.
After the US terror war against that country ended in 1990, Nicaragua owed over US$ 10 billion. Of that total over US $4 billion was owed to Russia and Mexico. Russia and Mexico cancelled Nicaragua’s debt completely.
But the United States and its allies and their financial prosthetic aids, the IMF and the World Bank, have continued to help squeeze every last drop of value from Nicaragua they can.
Whether the US pressured the Russian and Mexican governments into forgiving the debt as part of some labyrinthine power game is moot. Nicaragua’s example puts the basic terms of the typical “debt” relationship emphatically.
Rich countries wield the ultimate argument ”“ military and economic might. Whether it is France in the Ivory Coast, Australia in its neighboring Pacific islands, Canada and France in Haiti, or the US in Iraq.
“Do what we want, or else…..” is the fundamental message. US protection for terrorists like Luis Posada Carriles or Orlando Bosch and covert support for drugs-dealing paramilitaries in Colombia are footnotes that confirm the overall global reality.
Rich imperialist nations pillage poorer ones and destroy countries that resist their rapacity. The plight of the Palestinians, of Mozambique in Africa or Vietnam in Asia are emblematic of the global pattern of which Nicaragua and Haiti are the most obvious examples in the Americas. And yet discussion of debt is generally pitched in the very terms of the neo-colonial gangsters who deliberately drove their victims down into poverty in the first place.
“Debt” and class
Most discussion of the “debt” issue is quarantined from these wider political considerations. Cosseted economists write cold-blooded technical papers on the issue as though it had little to do with hundreds of millions of real people.
War mongering politicians like Britain’s Finance Minister Gordon Brown are permitted to cloak themselves in bogus righteousness while making obviously hypocritical claims about “debt cancellation”.
In this the economists and politicians are abetted by a comfortable class of rich country “non-governmental” organizations. Outfits like Oxfam UK and the plethora of their European counterparts receive millions from their governments and from the European Union.
These organizations represent the soft extra-mural arm of their countries’ official foreign policies. They lend moral legitimacy to their governments’ claims of good intentions with which the road to hell for the majority world is all too cruelly paved.
The fact that discussion around debt by these organizations seldom if ever raises the issue of reparations of colonial war crimes committed by their countries’ governments or environmental crimes committed by their countries’ multinational energy and mining corporations is very relevant.
The NGOs will respond that they are being realistic. But there is nothing realistic about ignoring very recent historical context. There is a hollow implausibility at the heart of NGO claims that they were responsible for getting governments to recognize and address the “debt” issue.
Well-meaning campaigns around “debt” end up lathered in mainstream media froth. Rich country governments are managing and re-packaging the “debt” problem because, if they do not, the whole rotten system that sustains their societies will crash into crisis.
Some idea of the gap between rich country rhetoric of good intentions and the grotesquely unjust reality can be gauged from the continuing agony of Nicaragua. A UN study suggests poverty in Nicaragua increased from 69% in the 1990s to over 80% now.
For the development significance of that statistic one can consult a paper on external debt for the Harvard International Development Institute.
It states: “Assuming a conservative population growth rate of 2.5 percent per year, the GDP in Honduras and Nicaragua will have to grow at a constant rate of about 6 percent per year during the next forty years simply to reach the income per capita that Costa Rica has today.”
Typically, the authors refrain from mentioning the role of US aggression in beggaring Nicaragua’s people.
Who writes the rules?
But even within the artificial moral bubble within which conventional discussion about “debt” floats in mid-air contradictions abound. Writing about the latest G-7 “debt” initiative, the European Network on Debt and Development notes that the aid held back under the “debt cancellation” scheme would be administered on the basis of heavy-handed donor country conditionality.
Obviously, different countries have different kinds of debt and different problems relating to the economic and financial sustainability of their “debt”. Yet no independent mechanism exists to define criteria for the right debt management policy appropriate for each country.
Elaboration of such criteria is left mostly to multi-lateral outfits like the IMF and the World Bank who have always worked deliberately and decisively to sustain the economic and political dominance of the countries that control them – the United States and its allies.
Under such a system, no independent mechanism to implement ways of resolving issues of “debt” will ever be allowed to exist. There may be much self-congratulation for therapeutic measures to make sure that debt is financially and economically sustainable. But the system of international debt-peonage will not be radically reformed let alone dismantled unless debtor countries combine against it.
As an expert panel for the Economic Commission for Africa has noted, “the lack of a consolidated African position and an effective and collective voice to engage in constructive dialogue with Africa’s partner countries and institutions with regard to debt relief was at the heart of the problem.” .
Similarly, the Economic Commission For Africa declared in 2002, “Due to the difficulties of determining which debts should be cancelled, there is need for an internationally agreed arbitration procedure that is administered independently and by neutral institutions.”
Developing from similar concerns, the Venezuelan government’s proposal for a Bank of the South is a concrete practical proposal for less developed countries to organize their own institutions and regain some autonomy.
Governments of less developed countries could organize around other demands. Obvious damaging anomalies include the system of offshore banking centers that permits wealth from poorer countries to be siphoned off beyond control of the global financial system.
The much vaunted “war on terror” leaves these grotesquely anomalous pirate plutocrat oases untouched. Likewise, sensible regulation of international money markets might help vulnerable countries avoid being left to the mercy of unscrupulous banks and financial houses that have crucified countries like Brazil or Argentina while making fortunes for their shareholders.
Re-vamp: Procrustes as Dracula
Procrustes’ bed has been remade under various covers since the eternal “debt” burden began to affect the stability of the international financial racketeering system from the 1970s oil-price shock onwards.
By the late 1980s the Paris Club of OECD creditor countries and their debtors had devised terms that underwent various modifications, eventually morphing into the Highly Indebted Poor Countries initiative (HIPC). HIPC offered a slight ratcheting down of the “debt”-rack mechanism for weaker countries in three year stages.
The aim is to get the victim back to “debt sustainability” so the living death process can be continued more efficiently. The terms are conditioned on the victim agreeing to sign away their autonomy so their tormentors can leech off even more of their wealth and natural resources.
World Bank authors frankly concede that stretching “debt” victims too far is counterproductive, “resolving debt distress is costly. For example, costs associated so far with the debt reduction of the poorest countries of the world under the original and enhanced HIPC Initiative is (sic) estimated at US$ 50 billion”.
The same study on “debt distress” notes that “debt” crises damage the racket’s own sustainability, “Holding constant future donor infusions into IDA, it is clear that any disruption in this flow of future repayment resulting from episodes of debt distress will have significant implications for IDA’s ability to provide new lending to the poorest countries.”
They also note that the Millennium Development Goals commit rich countries to a huge increase in development aid. But few rich countries have any real commitment to implementing those goals, as can be seen from their miserly development assistance allocations, ludicrously short of the official UN target – 0.7% of GDP.
Even taking the Millennium Development Goals at face value, little consensus exists as to the nature of the aid, its terms, priorities, or conditionality.
This creates further jeopardy for the international “debt” racket, “Financing the MDGs on inappropriate terms could lead to the re-emergence of debt problems in these countries and would undermine the very development goals that they are trying to achieve.” 
Resisting “debt”-based intervention
Most less developed countries are subject to volatile changes in export earnings as a result of “free (rich-country-rigged) markets”. So they cannot plan medium or long term economic strategies without external financial support when their export prices collapse.
In countries with a high incidence of AIDS, economic growth is jeopardized by the catastrophic decline in the number of economically active people and in the population’s ability to care for them. Natural disasters, like hurricanes, floods or earthquakes cost billions of dollars when they occur.
Fluctuations in income after falls in domestic tax revenue or foreign development assistance flows affect disproportionately the ability of impoverished countries to plan successfully.
Those imponderables for impoverished nations are compounded by crass, ideology-driven interference by the IMF, the World Bank and their regional clones.
The eternal program seldom varies : privatization, slashing State sector resources, market liberalization and capital deregulation. Often it is combined with corporate-welfare investment interventions like Plan Puebla-Panama in Central America, imposing infrastructure programs that have very little to do with the needs of the region’s poor majority.
Following the failure of the 2003 Cancún World Trade Organization talks, rich countries have taken advantage of the “debt” extortion racket to press grossly disadvantageous “free trade” deals on countries desperate for “debt” relief.
The record of privatizations of public utilities has generally been to dramatically increase prices and lower quality of services to the people who need them most. Poor countries could accumulate reserves and manage their debt better by resisting the faith based, “free market” speaking-in-tongues of IMF and World Bank bureaucrats.
Every country has its own specific characteristics and needs. Alternative economic programs should not be hard to devise. A typical sovereignty-recuperation package would veto further privatization and re-nationalize private sector monopolies resulting from those already undertaken.
Fiscal measures lowering the prices of basic goods would enable families to reduce their basic living costs, especially in countries where poverty affects over 70% of people. Helping the poorest should be accompanied by efforts to raise taxes on luxury imported items.
Financial measures might include dropping interest rates to levels that generate more activity with only marginally higher levels of inflation. Regulating capital flows and pressuring banks to loan more productively might be other ways to use capital controls in the national interest rather than against it.
The way out of “debt” and injustice: history again
Corporate greed protected by rich country neo-colonial mobster governments and their enforcers in the IMF and the World Bank have provoked unprecedented environmental, economic and humanitarian crises in the majority world comprised of less developed countries.
It is hard to disagree with former IMF chief economist Kenneth Rogoff who wrote recently “Debt collection from poor nations is an absurdity, now and into the distant future……”
His objection is fundamentally an economic one. The equally cogent moral objection to poor countries’ external “debt”, often made by NGOs, is not that it is absurd or impractical but that it is unjust and counterproductive. .
Things are worse than that. Current efforts to secure a just cancellation of poor countries foreign debt will continue to fail because rich countries are never going to relinquish control of the global resources they need to sustain their societies’ profligate, greedy, inherently unjust life-styles.
Practical responses to that reality include Cuba’s insistence on self-determination and self-respect. Likewise, Venezuela has shown that resource-rich countries can implement sovereignty-recuperation programs to undo the havoc wreaked by decades of neo-colonial subservience to the United States and its allies.
It is these models that offer the best way out of endless “debt” for less developed countries. They render marginal the proliferating verbiage generated by the opposing sides of the rich-country “debt” industry. In Latin America at least, history never ended. It took a well-deserved break in the Caribbean.
1. “Brasil. Aumentó la deuda externa y disminuyeron las reservas” www.argenpress.info June 22nd 2005
2. “Devilish details: implications of the G7 debt deal” Eurodad NGO briefing 14 June 2005
3. “Nicaragua, agonizantes estertores” Hedelberto López Blanch Rebelión -May 11th 2005
4. “The External Debt Problem in Central America: Honduras, Nicaragua, and the HIPC Initiative” Gerardo Esquivel, Felipe Larraín B., and Jeffrey D. Sachs Development Discussion Paper No. 645 August 1998
5. “Devilish details: implications of the G7 debt deal” Eurodad NGO briefing 14 June 2005
6. “Solving Africa’s External Debt Problem to Finance Development : Senegal Recommendations and Conclusions of the Experts” 17-18 November 2003 Dakar, Senegal Organized by the Economic Commission for Africa and the Republic of Senegal
7. “Economic Commission for Africa. ECA issues paper on resolving the debt overhang of low and middle income countries” Prepared for Inter regional Conference on Financing for Development Mexico City January 14-15, 2002
8. “Venezuela impulsará creación del Banco del Sur en Cumbre de Paraguay” Agencia Bolivariana de Noticias June 16th 2005
9. “When Is External Debt Sustainable?” Aart Kraay and Vikram Nehru The World Bank September 2003
11. “The false promise of debt relief” Kenneth Rogoff, Daily Times, Pakistan, June 19, 2005
12. “¿Pobreza o injusticia? Víctor M. Godínez” La Jornada, www.rebelion.org June 25th-2005
Toni Solo is an activist based in Central America – contact via www.tonisolo.net